Entain Narrow Losses Amidst Record World Cup Betting and Tax Pressures
The gambling giant reported a significant reduction in first-half losses, boosted by unprecedented betting activity during the World Cup final, but continues to face challenges from increased gambling taxes.
Entain, the owner of Ladbrokes, Coral, and Foxy Bingo, has reported a substantial decrease in post-tax losses for the first half of the year, narrowing to £11.4 million from £85.8 million in the same period last year. This improvement was largely attributed to a surge in betting activity during the recent World Cup, which the company described as its most successful football betting event to date.
Net gaming revenue experienced a 5% increase compared to the prior year, exceeding expectations. Online revenue growth was particularly strong at 7%, with notable performance in the UK and Australia. Headline earnings also surpassed projections, reaching £479 million.
Impact of Increased Taxes
Despite the positive revenue trends, Entain noted the significant impact of increased gambling taxes, which came into effect in April. The UK remote gambling duty was raised from 21% to 40%, and the levy on online sports betting increased from 15% to 25%. These changes are affecting online growth, as reflected in a year-on-year decline in online underlying earnings for the first half.
This tax environment has led other industry players to adjust their operations. William Hill owner Evoke has closed over a fifth of its betting shops in the past year due to the tax changes. Entain itself shut 45 stores in the Republic of Ireland and Northern Ireland earlier this year.
Strategic Outlook
Entain's Chief Executive, Stella David, acknowledged the substantial and disappointing nature of the tax changes but expressed confidence in the company's positioning to adapt to the new tax regime. UK and Ireland revenues saw an 8% rise in the period, with online growth of 13% helping to offset the impact of high street closures.
In the United States, the joint venture BetMGM reported a 4% year-on-year increase in net revenue to $1.4 billion, with adjusted earnings of $99 million, also driven by the World Cup and NBA playoffs. However, Entain has previously warned of deteriorating conditions in the US market, and BetMGM anticipates a longer timeline to reach its $500 million adjusted earnings target, previously set for 2027.
Entain currently has a net debt of £3.6 billion. The company plans to reduce this debt following the sale of a 20% stake in its Central and Eastern Europe unit to its joint venture partner, EMMA Capital. Entain intends to exit the region in phases, with any excess capital to be returned to shareholders.
Richard Hunter, Head of Markets at interactive investor, commented that Entain's strategy shows pockets of strength in its efforts to streamline operations and enhance its appeal. He noted that other factors have previously hindered share price progress, but a loyal investor base remains, reflecting the company's potential. The current market consensus for Entain shares is a strong buy.